I would suggest using Debian Linux for the server. I have been testing out a lot of different versions of linux, specifically looking for something that will run nicly on older hardware, and the best one I have found so far is Debian 3.1. The latest release does not come with MySql 5 but you can get that from here
http://dotdeb.org made specifically for Debian. If you are not interesting in MySql 5 then Debian 3.1 comes with MySql 4.0.24. I was able to install MySql download the server files and compile the Emu with out any problems. Debian runs great on my pathetic 400Mhz Pentium Celeron (Yeah, I said Celeron) laptop with 128MB Ram.
Of course it is all up to you and what you are more comfortable with in the end, I just thought that I would share my thoughts.
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